Transcript Alternative-Mining-Indaba_Trevor-Simumba

2013 Zambia Alternative
Mining Indaba
“Our Minerals, Our Future!
Putting People First!”
17th – 19th July 2013,
Fatmols lodge- Ndola
“Utilising Extractive
Industry Revenues for
sustained economic
development”
Presenter: Trevor Simumba, MD
Sub-Saharan Consulting Group
Zambia Limited
YOUR LOGOConsulting Group Research |Investment |Training | Consulting
Sub-Saharan
Table of Contents
Who are SSCG?
Sustainable Mining Industry
Diversification is a Challenge
Importance of Revenue management
Stabilisation Fund
Contact us
YOUR LOGO
Trevor Simumba, SSCG Zambia
Inspiring
Entrepreneurship,
Fostering SMEs
Development in
Africa
YOUR LOGO
Trevor Simumba, SSCG Zambia
Overview – Who we are?
Sub-Saharan Consulting Group (SSCG)
•
We are a UK based global management consulting firm that focuses at providing research
intelligence, corporate services, business management solutions and advisory to organisations in
Sub-Saharan Africa.
•
With extensive expertise in Africa – we provide expert knowledge, networks, advice and support to
organisations wishing to engage in business activities in Africa.
•
Our regional subsidiaries and operation coverage in Nigeria, Zambia, Kenya, Uganda and Malawi
allows us to work locally and close to business communities in Africa.
•
Our aims & objectives are to support SMEs development, foster innovative mind-set and promote
the cause for entrepreneurship in Africa.
•
Leveraging on innovation, entrepreneurship, international experience, local knowledge and market
intelligence, we provide advice on barriers, disseminate knowledge on the most pressing issues
that affect businesses, investors, public organisations and entrepreneurs today, identify and present
investment opportunities to investors to enhance sustainable economic and business growth in the
African continent.
Trevor Simumba, SSCG Zambia
Sustainable Mining Industry
 Economic development is for people, that is, for citizens of that
country.
 With the discovery of new large deposits in Kansanshi, Lumwana,
and recently Kalumbila - Zambia will remain a major international
player in the mining sector for another 30 to 40 years.
 If the benefits of economic growth fail to reach the majority, in the
long run there is no development.
 The industrial and SME sectors are one of the principal driving
forces for economic growth and job creation
Trevor Simumba, SSCG Zambia
Diversification is Still a Challenge
Nations have to make difficult choices between investment and consumption.
The policy stance, where the revenues derive from depletable natural resources,
like, copper and accrue directly to Government, offer enormous challenges to
policy makers, development practitioners and academics.
In general, many countries seemingly are unable to manage such revenues in a
sustainable manner and succumbing to pressures to embark on over
expansionary fiscal programmes.
Mining sector revival and high copper prices (though declining now) have
contributed to a marked improvement in the trade balance and a steep
appreciation of the currency.
However, there is minimal impact on poverty reduction with rural poverty
bearing the major brunt of the decline in people’s living standards.
Depressingly Zambia is still highly dependent on copper exports
Page  6
YOUR LOGO
Trevor Simumba, SSCG Zambia
Diversification is Still a Challenge
Natural resources can be used to make the transformation from a low-value
economy to one with a substantial labour- intensive manufacturing base.
The failure of natural resource wealth to lead to the expected economic growth and
development has been attributed to several factors, including:
 The so-called “Dutch Disease” — the syndrome of rising real exchange rates and wages
driving out pre-existing export and import-competing industries;
 Rent-seeking (corruption) by elites and others that otherwise could put their energies into
profit-making activities;
 Volatility of prices and the “asymmetry of adjustment” (it is easier to ramp up public
expenditure than to wind it down again);
 Inflexibility in labour, product, and asset markets; and
 Tensions between resource-producing and non-resource producing regions within
countries.
However, there is minimal impact on poverty reduction with rural poverty
bearing the major brunt of the decline in people’s living standards.
Depressingly
Zambia is still highly dependent on copper exports YOUR LOGO
Page  7
Trevor Simumba, SSCG Zambia
Resources – A Curse or Blessing?
‘I call petroleum the devil’s excrement. It
brings trouble…waste, corruption,
consumption, our public services falling apart,
and debt, debt we shall have for years’ –
Juan Perez Pablo Alfonso, the Co-Founder of
OPEC (The Economist Magazine, May 22,
2003).
Page  8
YOUR LOGO
Trevor Simumba, SSCG Zambia
Importance of Revenue Management
The Government faces a number of challenges in revenue management
and expenditure control, namely:
 Rising commodity prices means increased inflows of foreign exchange and
tax revenue
 Massive exploration and development in new minerals like oil, gas, nickel
and uranium where Zambia has little to no industry experience
 Growing dominance of multinational foreign firms, particularly, from India
and China whose work culture is different from the traditional mine
investors from Europe, South Africa and North America.
 National demands for greater domestic economic benefit (indigenous
citizens’ economic empowerment) from resource exploitation: meeting
aspirations without ‘killing the goose’.
 Growing Fiscal Decentralization and Revenue Influx at Sub national Level,
i.e., at provincial and district level. BUT the capacity of government at this
level to manage these resources is worryingly low.
Page  9
YOUR LOGO
Trevor Simumba, SSCG Zambia
Botswana like Zambia was one of the poorest
countries in the world at the time of its
independence in 1966. It also relied on foreign
grants (initially from Britain) for all its
development spending and most of its recurrent
budget. Today it’s a middle income economy
Trevor Simumba, SSCG Zambia
Going Forward
Windfall Revenues should be used in the following priority areas:
Establish a Revenue Stabilisation Fund that will ensure that we stabilize revenue
even when the cycle turns against us in a bust. Zambia should not repeat the
mistake of 1973 when we spent at the wrong time instead of saving for a rainy
day. This rainy day lasted for over 20 years and we are still paying the price today
of our historical mistakes.
Setting up of a special National Equity Fund that will lend to citizens as defined in the
CEEC Act at lower discounted interest rates. This should be targeted at the
manufacturing, tourism, rural development, skills development and the commercial
agricultural sectors.
Establishment of a Development Fund that would finance big infrastructure projects
on a public-private partnership basis that would also receive money from donors.
Establishment of a public service debt fund to reduce Government’s indebtedness
to local suppliers of goods and services. This would free up a lot of money into the
economy.
Trevor Simumba, SSCG Zambia
Thank you – You May Contact Us
Where you can reach us
Oxford Business Park, Oxford, OX4 2JZ, UK
Po Box 33203, Lusaka, Zambia
Page  12
Tel:
+ 44 (0) 1865 589022
Mobile:
+260 966754902
Email:
[email protected] or [email protected]
Web:
www.s-scg.com
Nigeria:
[email protected]
Zambia:
[email protected]
Malawi:
[email protected]
Uganda:
[email protected]
YOUR LOGO
Trevor Simumba, SSCG Zambia
Key Recommendations, cont’d.
Rehabilitation and refinancing of all the public universities and upgrading of our
technical vocational colleges to offer much needed training in skill areas where
Zambia is lacking, particularly, in technical and scientific skills.
Ensure adherence to investment licensing conditions by local and foreign investors.
Encourage the rehabilitation and expansion of energy, road, transport, and
communications infrastructure to support investment in new areas of the country.
Regional and local equity initiatives (e.g. regional funds) should be encouraged
across the provinces. Such equity programmes should be created in parallel to the
development and support of regional and local business angel networks as well as
business incubators and industrial clusters
Trevor Simumba, SSCG Zambia